Question

17. When the allowance method is used to account for uncollectible accounts, Bad Debt Expense is debited when a. a customer's account becomes past-due. b. a sale is made. an account becomes bad and is written off. d. management estimates the amount of uncollectibles. C. 18. Under the allowance method, when an account becomes uncollectible and must be written off a. Bad Debt Expense should be debited b. Accounts Receivable should debited c. Allowance for Doubtful Account should be debited d. Sales Revenue should be debited 19. The financial statements of Bonita Manufacturing Company report net sales of $666,490 and accounts receivable of $68,000 and $78,000 at the beginning and end of the year, respectively. What is the Average Collection Period for Accounts Receivable in days? (round the answer to 2 decimal places) a. 80.00 b. 40.00 c. 42.72 d. 32.24

Answer 1

17 D

18 C

19 Sales / Avg receivables = Accounts receivable turnover ratio

Avg receivables = (68,000 = 78,000) / 2

   =146,000/2

=73000

Accounts receivable turnover ratio  = 666,490/ 73000 =9.13

Collection period = 365 / Accounts receivable turnover ratio

= 365/ 9.13

=39.9  

Option B